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Transcript of 4.3 Product
Classification of Products
New design and Development
Product Life Cycle
Product Portfolio Analysis
Brand Development and Loyalty
Many businesses will have tangible and intangible products as sources of revenue
List the tangible and intangible products a ski resort might offer
Say I buy some chocolates for a school fundraiser
What is the functional value?
What is the emotional value?
Product Line - variety of products with the same purpose in a particular market
Nike has many product lines - for example
Can you think of other Nike product lines?
A product mix (aka product assortment) describes the variety of product lines for a business
A product range refers to ALL product lines of a firm's product mix
The product range for Unilever includes everything they sell in all of the brands above
A product mix could include every Axe sells
A product line could be Axe sprays, Axe hair or Axe shower
Fast Moving Consumer Goods
Specialty consumer products
Fast moving, low margins, requires repeat purchases to be profitable
Short shelf life, seasonal
Christmas trees might be given away for free on December 24 because the cost of disposal would be higher. Price changes with time.
White Goods - electronics for home use like appliances
Brown Goods - Home entertainment - TVs, DVDs, PCs, etc
Soft Goods - don't last as long, but still over a year - clothes, shoes etc
Luxury Goods - Price inelastic, prestige, customizable, exclusive
LIP - Low involvement products
HIP - High Involvement Products
Wedding rings, cars, prom dress, etc would involve a lot of shopping before making a final decision
People give little thought during the purchase process (Timmies coffee)
Used in the production process
Raw materials, components, inputs
Fixed assets - land, machinery, tools, equipment
#2 - Product development and testing
#3 Feasibility Study
#4 - Launch
#1 Market Research
Copyright & Patent
Tim Horton's will try new products in regions like Sudbury to see how consumers will react to a new product/policy/process, etc. If it goes well, they will consider a national rollout
Sources of New Product Development
Research and Development
'Me Too' Development
All the companies that built tablets after Apple's iPad
Copy the chart
Activity - pharmaceutical names
Bona fide names
Stars - high market share in an industry that is still growing. Think about the iPad in 2011. Apple had huge market share and the total industry was growing as a whole.
If you have low market share in a growing industry, what do you do? Invest in it more and try to gain that market share? This could be costly, but offers huge potential gains. A QUESTION MARK (AKA Problem Child or Wild Card) will not have an obvious answer as to whether to continue to pursue it or to divest.
What if you had the 19th best company in Typewriter sales? You would then have a small market share in an industry that certainly isn't growing. Dump the dogs!!!! Re-focus your advertising budget, your R&D resources, your productive capabilities, etc into other ventures
Do you think there was a huge difference in sales of Coke from 2006 to 2007? How about from 2009 to 2010? Will there be a huge difference from 2016 to 2017? NOT LIKELY!
That being said, even though Coke sales are really growing, they still make a huge amount of money! These cash cow profits can be used to R&D other products, to finance promotion of goods that do not yet have positive cash flow, etc
Companies have many products. P&G, Coke, Virgin, Unilever, GE, GM, Disney, etc all have many different products/brands/SBUs (stategic business units) that may be at differen parts of the product life cycle.
Therefore, the management of these brands requires different strategies.
A diverse portfolio with different products targeting different markets with different strategies allows a company to be balances and therefore reduces risk.
1. Price reductions
- Bracken thinks this is a last resort, desperate measure. It is easy for the competition to retaliate with price cuts and both companies with subsequently reduce profit margins.
New looks, colours, limited edition, etc can all add value to a product
4. New markets
Branding is quite different from promotion. The goal of promotion is to spark sales in the short terms.
Promotional tactics include coupons, 30% more, free samples, etc. These all have the ability to increase sales in the short term.
Branding, on the other hand, tries to establish how people feel about a brand long-term. Strong imagery is often used. Commercials like this likely don't tell us much about price, product features, availability, comparisons to competition, etc.
Strong branding can create loyalty. When people identify with a brand, they are willing to pay a premium to be affiliated with the conveyed lifestyle.
Benefits of brand loyalty - higher market share, charge a premium (thus better margins), inelastic demand, foster brand extension strategies, higher barriers to entry
Successful brands are capable of extending the maturity stage of the product life styles by using a variety of effective extension strategies
The opposite of brand loyalty is brand switching
Companies often use customer loyalty programs to prevent switching